A practitioner's perspective on REACH

Tim Jessel assesses the impact of REACH on the competitiveness of the European chemicals industry.

REACH, the European Union's (EU) regulation for the Registration, Evaluation and Authorisation of Chemicals that comes into force in June 2007, has one key central aim: to protect human health and the environment from the potential risks arising from the use of chemicals. It represents the latest step in the next generation of Health, Safety and Environmental legislation and is gong to affect almost all businesses that operate within the EU.

Legislators these days like to respond to public opinion. In the past the general public tended to be concerned about industry's activities at a site level and a whole raft of regulations now control manufacturing operations. However, in recent years, public focus has begun to shift - to concern about our products, their affects upon our health and their impact on the environment. As a result, we are now seeing the introduction of a new generation of legislation such as the Waste Electrical and Electronic Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) Directives which are already affecting the electronics sector. And now we have REACH - perhaps the most complex, far-reaching and costly piece of regulation ever to originate from Brussels. REACH has the potential to impact us all.

Given the fundamental nature of chemicals as the building blocks of our modern world and vital to everyday life, this should not surprise us. Chemicals are everywhere - especially if you live in a town or city, almost everything you see from when you wake up to when you go to sleep is made of or with chemicals.

REACH has been a long time coming, its origins date back to 1998 and it intends to achieve its goal by requiring business to fully ascertain the risks posed by the use of chemicals. In simple terms (and nothing is simple about REACH!) anyone that makes, imports or uses a chemical within the EU will need to consider his or her obligations. These obligations can range from ensuring that your supplier includes your use of their substance in its REACH dossier, to generating expensive toxicological data, to needing to undertake research and development activities to discover "safer" replacements for certain hazardous chemicals.

But what impact will REACH have? Much has been written about the various impact studies and cost estimates - ranging from €2bn to over €11bn - and at this stage it's impossible to know which is right, though some say these are underestimates! The EU chemical supply chain is highly complex and diverse; coming up with concrete figures therefore is a very difficult thing to do.

That said, my colleagues and I have been helping companies deal with the REACH regulation for some time now and have had the privilege to gain some unique insights into how REACH may work in practice. Writing from a practitioner's perspective, working with businesses on a day-to-day basis enables me to form some general conclusions.

Firstly it's true to say that REACH challenges every part of industry, no matter how it is defined. Indeed REACHReady has found that almost every manufacturing company (i.e. not just chemical businesses!) within the EU is affected in some way. While manufacturers and importers of chemicals will bear the brunt of REACH, it is the downstream user that suffers most of the unintended consequences - for example REACH may require you to substitute one of your vital raw materials but you may not be in a position to do so.

For all firms directly affected, REACH will present a major cost burden and for the vast majority this will directly impact the bottom line. Few firms believe they will be able to pass these costs on to their customers. No surprises then that our experience through interacting with hundreds of companies tells us that many will struggle to cope.

This issue is particularly acute for small and medium sized businesses and start-ups. SMEs are offered a substantial reduction in the fees they will have to pay to register their substances with the REACH authorities. However I'm afraid to say that they are unable to take any comfort from this. The registration fees are insignificant when compared with the overall costs of compliance including testing, administrative activities and indirect costs such as reformulation. These are costs that SMEs will have to meet in full.

We are also finding that even for larger firms who have the financial muscle and economies of scale to cope, there will be problems in human resources terms. There just aren't enough experts out there to deliver REACH and many organisations are considering re-training their staff and diverting valuable resource away from other business activities, such as innovation, to deliver compliance instead.

It's not difficult to see then that REACH has a high potential for negative impact on EU industry's competitiveness. That's why it's vital that well-meaning companies do not overreact - we have learned that it's not just responding to REACH that's important but responding in a proportionate and appropriate manner. It's relatively easy to state what activities companies should undertake to comply, much more difficult to decide what not to do. This is particularly important when considering the question of animal testing and will have major cost implications.

REACH then paints a pretty bleak picture, backed up by the lack of any evidence that it will improve the competitiveness of EU businesses. All the above factors put it at risk.

That said, there is a growing body of opinion that says REACH also presents an opportunity!

Many downstream users of chemicals have publicly stated that in future they will only source chemicals from manufacturers or importers that have registered and support their uses in the form of exposure scenarios. It's clear then that REACH compliance to some is going to be major competitive advantage and may even provide a source of added value.

In addition, EU suppliers will be able to sell their products to any market in the world, safe in the knowledge that they have sufficient data to comply with anyone else's system. This will be particularly important if other countries follow the EU's example and adopt similar legislation.

Substitution could oblige people to use alternative substances. It's not difficult to see how REACH, plus a patented substitute substance, may equal a considerable market opportunity!

There are less tangible benefits as well. REACH offers the best opportunity yet for industry to demonstrate that its committed to product stewardship and valuing the wellbeing of its customers. This may go some way towards improving reputation and helping prevent the need for further, perhaps even more stringent, regulations in future (and if you think REACH is going to be tough, the next level of regulation, SCALE, is already being considered).

In conclusion, REACH will have a considerable impact on the competitiveness of all EU industries and, for many companies, its negative effects will be unavoidable. But many others will be in a position to decide whether REACH becomes a threat or an opportunity. These companies should not just be asking "What do we have to do to comply?" they should also be asking, "How do we want to comply to derive the greatest business benefits?"

The CIA are running a free seminar on How to Prepare for REACH and showcasing REACHReady at Sustainabilitylive!, taking place from takes place from 1-3 May 2007 at the NEC in Birmingham. For up-to-the-minute news on exhibitors, the features programme and to register for free attendance, please visit: www.sustainabilitylive.com or call +44 (0)208 651 7140.

Tim Jessel is commercial director at REACHReady, a subsidiary business of the Chemical Industries Association (CIA). Building upon the CIA's rich knowledge and experience of the regulation, REACHReady has the world's longest track record for helping companies from all industry sectors, from all around the world to deal with the REACH regulation. More information is available on www.reachready.co.uk and REACHReady can be contacted on enquiries@reachready.co.uk or telephone +44(0)20 7901 1444